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SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Friday, January 25, 2013

This short-term EWP update is probably the most dull I have ever written since
I began publishing TWT on July 2011.

The main reason is that, Elliott Wave wise; I cannot decode the overlapping
pattern from the December 31 low into an interpretable count. For me it is
like driving at night without lights.

When I am clueless of the location of price within a pattern I just stand
aside and wait for clarity.

I remain confident that given the overlapping internal structure if this "nightmare
move", the up leg from the December 31 low must be a wave (A), therefore the
pattern from the November lows is not done.

If yesterday's hod has established the top of the assumed wave (A), which
remains a very questionable statement since there is no ending pattern that
can be seen (Impulsive 5-wave advance or an Ending Diagonal), given the stubborn
bullish market behaviour despite overbought readings of daily momentum indicators
and negative divergence of breadth indicators, It seems reasonable to expect
just a shallow correction, maybe no lower than the 0.381 retracement at 1462.

Not only there is absence of an ending pattern (In my opinion) but also VIX
and TLT did not do what they where expected to do.

Regarding VIX, it failed to confirm a potential Double Bottom pattern, and
it ended the day without even a hammer, instead we have a doji, which suggests
a lack of interest in seeking protection by market players.

So in my opinion SPX remains vulnerable of a pullback and the risk/reward
of being long is not appealing.

Regarding the TWT Swing Picks yesterday I was stopped out in $JO at 33.07
while in $UGL despite price closed below the stop loss I had established at
84.68 I have decided to maintain the position as long as GLD does not breach
the 200 dma = 161.24, although with yesterday's large gap down my scenario
has been considerably weaken.

My goal is to establish the most likely path that the price of a particular
asset will undertake and profit through ETF instruments both on the long and
short side and mainly with leveraged ones (2 x & 3 x).

Therefore the main purpose of TWT will be to establish investment strategies
regardless if the market is in an up trend or in a down trend, leveraging
the chosen scenario while managing the risk by establishing protective stop
losses.

Hence I will always define the risk, I will try to let winners run the wave
and I will cut the losses if my strategy is wrong.

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